Minimum Wage Hikes Eyed Nationwide

New York may soon become the 13th state to raise its minimum wage above the federal level of $5.15 an hour. In July, lawmakers in Albany voted to set base hourly pay at $7.15 by 2007. Gov. George E. Pataki vetoed the bill but, at presstime, legislators were seeking to override him.

Critics of the proposal fear that it will discourage hiring, and disproportionately hurt manufacturers, restaurants, and hotels, which employ a high number of minimum wage workers and can't, by their nature, pick up and move. Albert Solecki Jr., an attorney at Goodwin Procter in New York City, estimates that these kinds of businesses stand to see a 30% jump in labor costs over the next three years if the proposal becomes law.

Opponents also fear that the hike will devastate the start-up sector, driving entrepreneurs to Pennsylvania and New Jersey, where the lower federal level prevails. "If going 10 miles away decreases your labor costs, smart business owners will factor that in," says Solecki.

Of course, the political forces that have New York lawmakers pondering a wage hike are also at play nationally. Members of Congress are considering raising the federal minimum wage to $7 an hour. That would render moot the fears of New York employers.

Still, a larger question remains: whether these wage hikes actually help alleviate poverty. A recent study from two Cornell economists argues that an increase can draw upper-middle-class teenagers to compete for low-skill jobs with, say, immigrant workers who are their families' primary wage-earners. Nonsense, says Jeff Chapman, of the Economic Policy Institute in Washington, D.C., which supports the wage hikes. "We've had decades of wage increases," he says, "and it has no impact on labor markets."